TREASURY DEPARTMENT 
ii.s, FEDERAL FARM LOAN BOARD 


Circular No. 6 





ISSUED BY THE 

FEDERAL FARM LOAN BOARD 


y i J> w t4ft t _ x _ __ 

April 10, 1917 





WASHINGTON 

GOVERNMENT PRINTING OFFICE 
1917 

















FEDERAL FARM LOAN BOARD. 


WILLIAM G. McADOO, Secretary of the Treasury, Chairman. 
GEORGE W. NORRIS, Farm Loan Commissioner. 
CHARLES E. LOBDELL. 

W. S. A. SMITH. 

HERBERT QUICK. 


D. of D. 

APR 24 1917 



FARM LOAN BONDS. 



s, 

$ 


The Federal Farm Loan Act of July 17, 1916, created a Bureau in 
the Treasury Department, under the general supervision of a Fed¬ 
eral Farm Loan Board, consisting of the Secretary of the Treasury, 
as chairman, and four members appointed by the President. It 
was made the duty of this Board to divide the continental United 
States (exclusive of Alaska) into 12 districts and to organize in each 
one of these districts a Federal land bank. Each one of these banks 
is to start business with $750,000 capital, making the aggregate 
capital of the 12 banks $9,000,000. The Secretary of the Treasury 
was directed to subscribe, on behalf of the United States Govern¬ 
ment, to any stock not otherwise subscribed for within 30 days of 
the opening of the subscription books, and in pursuance of this 
direction $8,879,905 has been subscribed on behalf of the Govern¬ 
ment. 

These banks are authorized to make loans to farmers upon first 
mortgages, and to pledge these mortgages as collateral security for 
bonds to be sold to investors, the proceeds of the sale of these bonds 
to be used in making additional mortgage loans. 

The act “looks to the launching of a second national-bank sys¬ 
tem * * * to afford facilities to citizens engaged in the basic 

industry of agriculture to secure credit with which successfully to 
"carry on Their operations' sdt essential to the general welfare and to 
which the value of their property ought to entitle them.” 

In response to numerous inquiries the following information has 
been compiled in reference to the Farm Loan Bonds to be issued 
by the Federal Land Banks under the provisions of the act. 

These bonds will be issued in series of not less than $50,000 (prob¬ 
ably not less than $250,000) each, as and when authorized and 
approved by the Federal Farm Loan Board, after such investiga¬ 
tion and appraisement as it shall deem wise. They will be the 
obligations of the issuing bank. 

$25, $50, $100, $500, and $1,000. 

Coupon, may be exchanged into registered. Coupons payable at 
any one of the 12 banks. 

Twenty years, redeemable after 5 years at par. 

Rate per cent, payable semiannually. 

Pledge of an equal amount of first mortgages on cultivated farms. 
These mortgages are limited to 50 per cent of the value of the land 
mortgaged and 20 per cent of the value of the permanent insured 
improvements, as determined by two separate appraisements, of which 
the second is to be made bv an appraiser appointed by the Farm 
Loan Board. The equality between the amount of bonds outstand¬ 
ing and the amount of collateral pledged will always be maintained 
by the redemption of bonds or the addition of collateral, but as 
every loan will be made on the amortization plan, the principal of 
each mortgage will be reduced annually, thus effecting a continuing 
increase in the “equity” or difference between loans and land values. 

91636—17 3 


Denominations. 

Form. 

Term. 

Interest. 

Security. 






LIBRARY OF CONGRESS 


0 021 217 655 2 


4 FARM LOAN BONDS. 

Each mortgage is guaranteed by a “Farm Loan Association," of 
which the borrower is a member and stockholder. On this stock 
there is a double liability. Each association is required to buy stock 
in the bank to the amount of 5 per cent of the loans to its members, 
and this stock is held by the bank as security on the association's 
guaranties. Each bank will start business with assets of $750,000, 
derived from the sale of its capital stock. This stock will increase 
with each loan made, to the amount of 5 per cent of such loan, until 
it reaches $1,500,000, after which the repayment of the $750,000 
originally subscribed will begin, such repayment being concluded 
when the aggregate capital reaches $3,000,000. Twenty-five per 
cent of the net earnings must be carried to reserve account until that 
account shall equal 20 per cent of the outstanding capital, and 5 per 
cent thereafter. The total issue of bonds is limited to 20 times the 
capital stock of the issuing bank. 

Joint liability. The 12 Federal land banks are jointly liable for interest payments 

upon the bonds issued by any one of their number, ana for such 
portion of the principal as shall not be paid after the assets of the 
issuing bank have been liquidated and distributed 

Certification. Each bond is to contain on its face a certificate, signed by the 

farm loan commissioner, that it “is issued under the authority of 
the farm-loan act, has the approval in form and issue of the Federal 
Farm Loan Board, and is legal and regular in all respects; * * * 

that it is issued against collateral security of United States Govern¬ 
ment bonds, or indorsed first mortgages on farm lands, at least equal 
in amount to the bonds issued; and that all Federal land banks are 
liable for the payment of each bond." 

Safeguards. The bonds will be engraved at Washington, by the Bureau of 

Engraving and Printing, and the use of the Secret Service is author¬ 
ized to protect them from counterfeiting. 

Legal investments. They are made lawful investments^ for. <.11 fiduciary and trust fund' 
and security for all public deposits under the jurisdiction and control 
of the Federal Government. They are already legal investments 
under the laws of some of the States, for the funds of savings banks, 
insurance companies, guardians, and trustees, and legislation is 
pending to make them legal in most of the other States, 
pcraitaries. sav ' ngs de ‘ They are acceptable at par to secure postal savings deposits. 

Banks. They may be bought and sold by any member bank of the Federal 

Reserve System. 

ation? mption fromtax " They are expressly declared to be “instrumentalities of the Govern¬ 
ment of the United States," and as such exempt, both as to principal 
and the income derived therefrom, from Federal, State, municipal, 
and local taxation. 

Federal supervision. The registrars, appraisers, and examiners are appointed by the 
Federal Farm Loan Board, and the operations of both the farm loan 
associations and the Federal land banks will be at all times subject 
to the examination and supervision of the Board. 


o 






